BRUSSELS (Reuters) – Brexit talks are deadlocked over money, the EU’s Michel Barnier said on Thursday as he ruled out discussions on future trade being launched by EU leaders next week but spoke of possible progress by December.

Barnier and his British counterpart, Brexit Secretary David Davis, told reporters there had been some progress this week on the other two issues around Britain’s March 2019 withdrawal from the bloc on which the EU demands “sufficient progress” before it will agree to discuss a transition and future relationship.

Davis renewed his call for EU leaders to give a green light to those talks when they meet Prime Minister Theresa May at an EU summit in Brussels next Thursday.

Barnier made clear, however, that despite new momentum from concessions given by May in a speech at Florence lsat month 22, British proposals on expatriate citizens’ rights and the Irish border still failed the EU test, while London’s refusal to spell out a detailed cash offer was “very worrying” for business.

May said Britain would ensure the other 27 countries did not lose out financially from Brexit in the current EU budget period to 2020 and would honour commitments — but Barnier said London was failing to spell out just what it was ready to pay.

“Regarding that question, we are at an impasse, which is very worrying for thousands of projects everywhere in Europe and also worrying for those who contribute,” he said.

Nonetheless, he offered hope: “I am still convinced that, with political will, decisive progress is within reach in the coming two months. With David Davis, we will organise several negotiating meetings between now and the end of the year.”

With signs that nerves are fraying on both sides and some hardline Brexit supporters demanding that May just walk out of talks, both negotiators repeated that they were ready for any eventuality including a collapse. But, Barnier warned, “no deal would be a very bad deal”.

An EU flag is waved near the Houses of Parliament in central London, Britain September 22, 2017. REUTERS/Toby Melville

RESIDENCE RIGHTS

Davis announced a “streamlined” new system for the 3 million EU citizens in Britain to claim residence rights, answering EU concerns, and said he expected good further progress on other issues. Barnier repeated that Brussels stills wants them to have recourse to EU judges to safeguard their rights and said there were still differences on rights for future family members.

A British demand for its million or so citizens on the continent to have lifetime rights to move to any of the bloc’s 27 countries after Brexit is held up by doubts among the member states. Barnier said those are rights to do with post-Brexit decisions and should be dealt with in the next phase of talks.

“I make no secret of the fact that to provide certainty we must talk about the future,” Davis said, stressing his demand for trade talks. “I hope the leaders of the 27 will provide Michel with the means to explore ways forward with us on that.”

“As we look to the October Council next week, I hope the member states will recognise the progress we’ve made and take a step forward in the spirit of the prime minister’s Florence speech.”

Barnier was pressed to say in public whether he would ask EU leaders’ permission to make some preliminary exploration of what a transition after March 2019 would look like. EU officials and diplomats say he has raised that issue with governments.

However, he told the news conference that he would follow a mandate ruling out any discussion of the future before issues arising from Britain’s past membership are settled and said it was important to respect the “sequencing”.

With the talks poised at a delicate stage, EU officials say it is unclear what leaders will tell May next week. They all rule out a clear move to trade talks but many expect “positive language” to try to defuse British accusations of Brussels intransigence and to help May stand up to her own party critics.

Officials see the early part of next year as a virtual deadline for agreeing to move on to discuss the future relationship. Failure to do so would raise the risk of there being no smooth transition and even of no deal at all.